Accounting : The Adjusting Process
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Example Question #4 : Accounting
Which of the following statements is correct regarding accrual accounting?
It is the same as the cash basis of accounting
Expenses are reported when they are paid
Revenue is reported when payment is received
Revenue is reported when it is earned
Revenue is reported when it is earned
Under the accrual basis of accounting, revenue is recognized when it is earned, not when payment is received, and expenses are recognized when they are incurred, not when they are paid for. It is not the same as the cash basis, which recognizes revenue and expenses in the period that payments are made and received.
Example Question #5 : Accounting
Which of the following statements is correct regarding accrual accounting?
Revenue is reported when it is earned
Revenue is reported when payment is received
Expenses are reported when they are paid
It is the same as the cash basis of accounting
Revenue is reported when it is earned
Under the accrual basis of accounting, revenue is recognized when it is earned, not when payment is received, and expenses are recognized when they are incurred, not when they are paid for. It is not the same as the cash basis, which recognizes revenue and expenses in the period that payments are made and received.
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